Forex Trading FAQ's
iFOREX offers online trading for a wide range of financial assets, including Shares, Indices, Commodities and Currencies, in the forms of CFDs and Forex. In CFDs and Forex, investors have the ability to profit from the fluctuations in the price of a financial asset, by buying it cheap and selling it at a higher price or vice-a-versa. Most investors take advantage of the optional Leverage feature, which allows them to obtain large exposure for a relatively small initial deposit. The high degree of leverage that is obtainable in the trading of CFDs and Forex can work both against you as well as for you.
- What is a CFD?
- What is Forex?
- How does CFD and Forex trading work?
- What are the Market trading hours?
- What tools do I need to trade online?
- How old do I need to be to trade?
- What is Leverage?
- What is a Pip?
- What is a Spread?
- What does going "long" and "short" mean?
- Does the Forex market have a central location?
- How are prices determined?
- Are orders executed even if the underlying market is closed?
- Are there any conditions that can affect the rate at which my Market Orders are executed?
- Can I place Limit Orders when the market is closed?
- What are the costs for opening & closing deals on CFDs thru iFOREX?
- What is the validity of a Spot transaction and what is Rollover in the Forex markets?
- What happens if a CFD position remains open overnight?
A: A CFD, or Contract for Difference, is an agreement between two parties to exchange the difference between the opening price and closing price of a contract. CFDs are derivatives products that allow you to trade on live market price movements without actually owning the underlying instrument on which your contract is based. You can use CFDs to speculate on the future movement of market prices regardless of whether the underlying markets are rising or falling. You have the opportunity to sell and profit from falling prices, or buy and profit from rising prices. Moreover, with our vast variety of markets, you can gain exposure to markets you may not have had access to before. We offer CFDs on shares, indices, and commodities.
Q: What is Forex?
A: Forex is a shortened term used for ‘Foreign Exchange’. It is the process of buying and selling currencies. The foreign exchange market is the biggest and most liquid financial market in the world. The market operates 24 hours around the clock from Sunday night through Friday and comprises central banks, currency speculators, organizations, governments, retail investors and international investors. Over the years, the size of the Forex market has been constantly increasing. According to the Bank for International Settlements’ (BIS) 2013 Triennial Survey of global FX market volumes, the average daily volume in the global Forex markets was estimated at $5.345 trillion, 34% higher in than the $3.971 trillion in April 2010 ($3.21 trillion daily in April 2007 and $1.7 trillion in 1998).
Q: How does CFD and Forex trading work?
A: Forex is traded in currency pairs while CFD’s are commonly a financial instrument that is valued in a specific currency. Common currency pairs are the Euro/US Dollar (EUR/USD), US Dollar/Japanese Yen (USD/JPY), Great British Pound/US Dollar (GBP/USD), Euro/Japanese Yen (EUR/JPY) and Australian Dollar/US Dollar (AUD/USD). You can buy and sell each currency or financial instrument.
Q: What are the Market trading hours?
A: Normally, during the European and North American winter time, weekly activity begins on Sunday at 22:05 GMT continuously until Friday 21:00 GMT. During the Day Light Saving times in these regions, the weekly market activity begins on Sunday at 21:05 GMT and ends on Friday at 20:00. Market activity hours may vary due to public holidays or due to unusual liquidity conditions which may arise from exceptional global events. Opening or Closing times may also be altered by iFOREX due to liquidity and risk management considerations. Please be advised that while most of the instruments are traded on a 24 hour basis without interruption, some instruments, mainly shares and indices, have special Trading Hours.
Q: What tools do I need to trade online?
A: To be able to trade you only need a device with an internet connection and a funded trading account. In addition, we strongly recommend you to be equipped with Forex/CFD’s or other financial education and trading tools to help you minimize the risks in the market.
Q: How old do I need to be to trade?
A: You must be over the age of 18 to trade.
Q: What is Leverage?
A: Leverage is used to significantly increase your purchasing power. No other market gives you so much liquidity and leverage at the same time. On some instruments, iFOREX provides a leverage of up to 400:1. This means that with a deposit of $100, you can trade with up to $40,000.
Q: What is a Pip?
A: In financial markets, specifically in the Forex market, pip (percentage in point) is a unit of change in an exchange rate of a currency pair. Most major currency pairs are priced to four decimal places, and a pip is one unit of the fourth decimal point: for dollar currencies this is to 1/100th of a cent.
Q: What is a Spread?
A: The spread is the difference between the BUY price and the SELL price of two instruments. For example, if the EUR/USD is trading at 1.3100 (buy) and 1.3098 (sell), then the spread is 2 pips.
Q: What does going “long” and “short” mean?
A: Going “long” is when a trader buys an asset expecting its value to rise. This is also called opening a long position. Going “short” or opening a short position, is when a trader sells an asset, expecting its price to decline so it can be bought back in the future at a lower price
Q: Does the Forex market have a central location?
A: Unlike the equities market, the Forex market does not have a central location. Transactions take place over the internet or phone which is why the market is available 24 hours a day.
Q: How are prices determined?
A: There are various ways prices can change. Economic and political conditions usually affect the value of an asset, along with interest rates, inflation, and supply and demand.
Q: Are orders executed even if the underlying market is closed?
A: No. iFOREX does not execute orders during off-hours.
Q: Are there any conditions that can affect the rate at which my Market Orders are executed?
A: Yes, during market conditions that are characterized by high volatility or communication latency, and due to the time it takes for an order to be executed, market orders may sometimes be executed at a different rate than requested.
Q: Can I place Limit Orders when the market is closed?
A: Yes. Even when the market is closed, it is possible to add, change and remove Limit Orders on all instruments.
Q: What are the costs for opening & closing deals on CFDs thru iFOREX?
A: iFOREX does not charge any fee or commission for opening & closing deals on CFDs. The clients’ costs are derived from the spread - this is the difference between the buy price and the sell price, which is always displayed on your trading screen. Overnight financing applies where applicable.
Q: What is the validity of a Spot transaction and what is Rollover in the Forex markets?
A: In the Forex and Precious Metals Spot markets, rollover is the process of extending the settlement date of an open position when it reaches its value date. In most currencies and other financial Spot trades, a position is open with validation for two business days after its execution date. By rolling over the position - the position’s settlement period is extended by two additional business days. In similarity to the Forward mechanism, the rollover process involves a price adjustment due to interest rate differences between the 2 financial products, plus or minus a mark-up (interest spread), depending on the type of position you hold (Long\Short). Such adjustments may go both ways, meaning that you can be either credited or debited for such adjustments.
Q: What happens if a CFD position is held open overnight?
A: CFD are exposed to overnight financing. When you hold a CFD position overnight your CFD position may consequently be subject to a credit or debit, calculated on the basis of the relevant Inter-Bank Offer Rate for the currency in which the underlying instrument is traded, plus or minus a mark-up, depending on the type of position you hold (Long/Short). For more information you can check our Trading Conditions.
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